27.09.202218:30 Forex Analysis & Reviews: Analysis of GBP/USD. September 27. Silvana Tenreyro: rates may not be raised, but we want to be sure that inflation will decrease

For the pound/dollar instrument, the wave marking looks quite complicated at the moment but still does not require any clarification. The upward wave, built between May 13 and May 27, does not fit into the overall wave picture, but it can still be considered corrective as part of the downward trend section. Thus, it can now be concluded that the downward section of the trend continues its construction. At the moment, we have completed waves a, b, c, and d, so we can assume that the instrument is inside wave e. Within this wave, waves of a lower scale are being viewed, and I can assume that the last increase in quotations is wave 4 in e. If this is indeed the case, then the decline in quotes continues within the framework of wave 5 in e, which can be completed at any time, as it has already taken on too extended a form. But the wave marking for the euro currency has already suffered certain changes, which means it can also suffer for the pound sterling. Both the downward trend sections can take on an even more extended form. Both instruments continue to move almost without corrective structures. Therefore, as before, you need to try to isolate impulse structures and work on them.

"Inflation will decrease, but this is not certain"

The exchange rate of the pound/dollar instrument increased by 120 basis points on September 27, but activity decreased significantly compared to Monday. However, I did not think that the pound would now trade with an amplitude of 200-300 points every day. Of the most interesting news on Monday and Tuesday, I can highlight the presence of a plan to reduce taxes in the UK. According to many analysts, it caused a large-scale decline in demand for the pound and a speech by a member of the Bank of England's PEPP committee, Silvana Tenreyro. Silvana Tenreyro said on Monday that even the August interest rate should have been enough for inflation to return to 2% in the medium term. However, the Bank of England believes that every month there should be clear evidence that inflation is declining, and it is declining at a high rate.

Tenreyro also said that the central bank would continue to raise the rate systematically and that no one would rush, as higher growth rates may shock the markets even more. A slower rate of increase will lead to a weak decline in the consumer price index, which may stimulate wages to rise over time. Tenreyro believes it is very difficult to predict inflation in the short term. Remember that the latest inflation report showed a slowdown to 9.9% y/y. However, representatives of the Bank of England do not consider this slowdown impressive. They also do not think that inflation will now decrease every month. The risks of it resuming its acceleration remain high. The rates of the Bank of England are likely to continue to rise, based on these words of Tenreyro, but this news has passed by for the British pound. The pound is now so weak, and the market is so keen on its sales that such "micro-news" cannot increase demand for it.

General conclusions

The wave pattern of the pound/dollar instrument suggests a continued decline in demand for the pound. I advise selling the tool now, as before. It is necessary to sell more cautiously since, despite a strong decline, the construction of a downward trend section may be completed in the near future. And the goals of this section are scattered up to the level of 1.0140, corresponding to 261.8% Fibonacci.

The picture is similar to the euro/dollar instrument at the higher wave scale. The same ascending wave does not fit the current wave pattern, the same five waves down after it. Thus, one thing is unambiguous – the downward section of the trend continues its construction and can turn out to be almost any length.